Decision Number 1132

SUBJECT TO FINAL EDITING

October 30, 2009

A Review of a Decision of Law by Bishop Mary Ann Swenson of the California-Pacific Annual Conference Related to Conference Clergy Benefit Charge

Digest

The bishop's decision of law is affirmed relating to the applicability of the Conference Clergy Benefit Charge of the California-Pacific Annual Conference and the manner of implementation of this plan to cover the costs of the health premiums for retired and incapacitated clergy.

Statement of Facts

During the 2008 session of the California-Pacific Annual Conference, the presiding bishop, Mary Ann Swenson, received a written request for a bishop's decision of law regarding a conference clergy benefit charge that had been adopted by the annual conference. The bishop's initial report to the Judicial Council was untimely and did not answer the two questions that had been posed. The questions of law were remanded back to her with directions to answer the questions presented within 30 days in accordance with ¶ 2609.6 of the 2004 Discipline (Memorandum 1116). The bishop has complied with this remand. In 2006, the California-Pacific Annual Conference voted to cover the net cost of health insurance for retired and incapacitated clergy by direct billing to the salary paying units of the Annual Conference rather than covering the cost through apportionments. Such direct billing was carried out under ¶ 613.1(d) of the 2004 Discipline. Similar action was taken by the Annual Conference in 2007 and 2008. At the conclusion of the 2008 Annual Conference Session, A Request For An Episcopal Ruling under ¶ 2609.6 was presented to the bishop by a member of the Annual Conference. The request asked the bishop to rule on two questions arising from this practice. The questions are:

1. Subsidy for health insurance premiums of retired clergy is a current expense of clergy support of the Annual Conference. All other current expenses of the annual conference are apportioned per a formula recommended by the Council on Finance & Administration and approved by the Annual Conference ¶¶612.3, 614 of the 2004 Book of Discipline. May a current expense for clergy support be allocated to local churches in a different formula than that used for apportionment of all other clergy support expenses of the Annual Conference?

2. The annual conference has allowed the Conference Board of Pensions to determine the amount of the need for the cost of subsidy for the health insurance premiums for retired clergy some months subsequent to the annual conference session. In addition, the Annual Conference has allowed the Conference Board of Pensions, in consultation with the Council on Finance & Administration, to set the formula by which these expenses of the Annual Conference will be directly billed to the local churches, some months subsequent to the annual conference session. Does this practice amount to allowing another entity to determine a conference budgetary expense and income source(s), contrary to Judicial Council Decisions 584 and 590, and several subsequent decisions in which those are referenced?

The Bishop ruled "Yes" in response to the first question with the following rationale:

The Annual Conference's subsidy for health insurance premiums of retired clergy can be directly billed to local churches according to a formula different than apportionments. The Annual Conference is not obliged by The Discipline to provide any medical insurance premium subsidy for retired clergy. The Annual Conference has decided to provide such a subsidy though direct billing to local churches. ¶613.1(d) of the 2004 Book of Discipline provides that the amounts "… necessary to meet the needs of pensions and benefit programs of the conference. . . need not be derived solely from apportionments." The Annual Conference subsidy for retired clergy health insurance premiums is such a "benefit program," and it can be paid by any means adopted by the Annual Conference.

The Bishop ruled "No" on the second question providing the following rationale:

The Annual Conference properly delegated to its Board of Pensions the task of setting a formula for the direct billing of local churches for the cost of annual conference subsidy of health insurance premiums for retired clergy, after the amount of such premiums became known. The Discipline does not require the Annual Conference to provide such benefits, or to pay for them. Having decided to provide such benefits, and having decided to bill local churches for the cost of such benefits, the manner of allocating the billing for such benefits to local churches may properly be delegated by the Annual Conference to its Board of Pensions.

Jurisdiction

The Judicial Council has jurisdiction under ¶ 2609 of the 2004 Discipline.

Analysis and Rationale

Question 1

The Conference Clergy Benefit Charge as established by the California-Pacific Annual Conference in 2006 is specifically permitted by ¶ 613.1 (d) of the 2004 Discipline. The California-Pacific Annual Conference discovered it was over-funded in the account needed to cover pre-1982 defined benefits under the Supplement One to the Clergy Retirement Security Program (Pre-1982 Plan). This fund is held by the General Board of Pension and Health Benefits. The Conference Board of Pensions learned that such over-funding could be used to pay for the contributions for the defined benefit portion of the new Clergy Retirement Security Program (CRSP). It cannot be used for any other purpose. The California-Pacific Annual Conference Board of Pensions and the Conference Council on Finance and Administration decided to recommend to the Annual Conference that the Conference's obligation for the defined benefit portion of CRSP be paid by allocating a portion of the over-funded Pre-1982 Plan. This relieved the local churches of the responsibility for paying the CRSP-Defined Benefit (DB) for the active clergy under appointment. Recognizing that the over-funding position would eventually be eliminated, the Conference Board of Pensions recommended the establishment of the Conference Clergy Benefit Charge to be used to pay for the health insurance premiums for retired and incapacitated clergy. As approved in 2006, the local churches were directly billed for approximately the same amount as the CRSP-DB contributions. The reasoning held that the churches would not experience a financial shock when they were eventually directly billed for the CRSP-DB. The billed amount was calculated as a percentage of the "actual compensation" paid to the active clergy. The amount did not come from the compensation of the individual, but was calculated in a similar manner as previous pension contributions made by the local church. This plan was approved by the 2006, 2007, and 2008 Annual Conference sessions. The Conference Council on Finance and Administration agreed with these recommendations each year. This met the requirement of ¶ 613.1 of the 2004 Discipline which requires a budget for apportioned items. Health insurance for active and retired clergy is not required by the 2004 Discipline. The Council has previously ruled in Decision 717 that "The Discipline does not require that such benefits as health care insurance be provided before or after age 62. . . Each Annual Conference determines its own qualifications for participation in a health care insurance program or other non-pension benefits for its members." There is no requirement for annual conferences to budget for the expenses of these programs. There is no directive in the 2004 Discipline as to how these expenses will be covered if an annual conference chooses to provide such coverage. Direct billing to local churches is not prohibited nor is there any statement requiring that these expenses be apportioned. In Decision 707 the Judicial Council held that "the Annual Conference has the authority and responsibility to provide for the clergy support. In the case at hand the Wyoming Annual Conference adopted a specific method of funding this obligation." It further ruled that the conference plan "does not violate ¶ 2510 of the Discipline (1992). Neither does it violate Par. 704.2 which reads 'An Annual Conference cannot financially obligate any organizational unit of The United Methodist Church except itself.'" The Bishop's ruling on this question is correct.

Question 2

This inquiry asks whether the practice of allowing the Conference Board of Pensions to determine the formula and amount for the direct billing of the local churches, subsequent to annual conference session, for the subsidy for the health insurance premiums for retired clergy is in conflict with previous Judicial Council decisions regarding the delegation of authority to other bodies. The annual conference did not delegate to the Conference Board of Pensions the responsibility to wholly determine the formula for the allocation of the retired clergy health benefits. The annual conference had, in fact, determined the basic formula to be used when it adopted the following recommendation during its 2007 regular session of annual conference:

"The DB component of CRSP for 2008 will be funded by the Conference by transferring the full cost, approximately $2.6 million, from the Pre-82 defined benefit plan overfunding to CRSP. In lieu of fully charging this cost to the salary paying units (local churches and Conference), the salary paying units will be billed an amount to be determined by the Board of Pension on or about October 1, 2007, when health insurance costs for 2008 are known, and will be based on clergy's actual total compensation and other factors. It is the intent that the billings will cover the net cost of retiree health insurance and health insurance for persons on incapacity and a small administrative override. ..."

Thus, it was the annual conference that determined the basic formula and then delegated to the Board of Pensions the task of allocating the cost of the retiree insurance once the total cost of said premium became known to the Conference. The Bishop is correct in her ruling that the annual conference has authority to take said action. The annual conference had already approved the formula. It did not delegate that responsibility to another body. The Discipline does not require the Annual Conference to provide this benefit for retired and incapacitated clergy. Therefore, the Annual Conference, as part of the approval of the plan, is able to direct the Conference Board of Pensions to make the calculations once the premium information becomes available. This is not an improper delegation of authority as referenced in Judicial Council decisions which affirm the principle that the Annual Conference may not delegate any authority given it by the Discipline.